World food price index hits two-year low despite 15-year hike in rice prices

Onome Amuge

The benchmark index of international food commodity prices dropped to a new two-year low, marked by a decline in  price indices for dairy products, vegetable oils, meat and cereals which offset recent record hikes in rice and sugar prices.

The Food and Agriculture Organisation of the United Nations (FAO) stated this in the latest  FAO food price index report, which monitors monthly changes in the international prices of a basket of commonly-traded food commodities.

According to the UN food agency , the global food price index averaged 121.4 points in August 2023, reversing the 123.9 points rebound registered in July 2023. It also pushed the index as much as 38.3 points below its peak reached in March 2022 following Russia’s invasion of Ukraine.

Notably, the FAO cereal price index averaged 125.0 points in August, down 0.9 points from July and standing 20.6 points below its value in the corresponding period of 2022. International wheat prices declined 3.8 percent, mostly reflecting higher seasonal availability from ongoing harvests in several leading exporters in the northern hemisphere. International coarse grain prices also plumetted in August by 3.4 percent.

In a similar trajectory, maize prices fell for the seventh consecutive month, hitting their lowest value since September 2020, driven by ample global supplies from a record harvest in Brazil and the start of the harvest in the U.S.

Among other coarse grains, the FAO report showed that world prices of sorghum declined in August, pressured by the start of the harvest in the U.S, the world’s largest sorghum exporter, while world barley prices firmed slightly.

By contrast, the FAO All Rice Price Index in August rose by 9.8 percent month-on-month to reach a 15-year nominal high, reflecting trade disruptions registered in the aftermath of India’s July ban on Indica white rice exports.

“Against a backdrop of seasonally tight availabilities ahead of new-crop harvests, uncertainty over the ban’s duration and concerns that export restrictions would be extended to other rice types caused supply-chain actors to hold on to stocks, re-negotiate contracts or stop making price offers, thereby limiting most trade to small volumes or to previously concluded sales,” the report stated.

The FAO vegetable oil price index also registered lower valuations as it averaged 125.8 points in August, down 4.0 points month-on-month after a temporary increase in July. The decline, according to the FAO, reflected lower world prices across palm, sunflower, soy and rapeseed oils.

Meanwhile, international palm oil prices fell moderately in August, mainly underpinned by subdued global import purchases as well as seasonally rising outputs in leading producing countries in Southeast Asia. In the meantime, world prices of sunflower oil declined by nearly 8 per cent from the previous month amid weakening import demand that coincided with abundant offers from major exporters. World prices of soy and rapeseed oils also declined  due to improving soybean crop conditions in the U.S and ample global exportable supplies.

The FAO dairy price index recorded its eighth consecutive monthly decline to an average of 111.3 points, down 4.6 points from July,and as much as 32.1 points below its corresponding value in 2022.

International prices across all dairy products declined in the reviewed period, with whole milk powder prices falling the most, amid abundant supplies especially from Oceania amid seasonally rising production, together with a slowdown in the pace of imports by China, although import volumes remained relatively high. The report showed that skim milk powder prices fell to their lowest level since mid-2020 due to subdued import demand and the lacklustre market activities associated with the summer holidays in Europe. Moreover, international butter and cheese prices dropped, reflecting similar factors coupled with steady production schedules in Oceania.

The FAO Meat Price Index was down 3.6 points from July as it averaged 114.6 points in August,and was also 6.5 points below its value a year ago.

International prices of all meat types dropped in August, with the steepest fall registered for ovine meat, principally underpinned by a surge in export availabilities, mainly from Australia, and weaker demand from China. Pig meat prices also declined, driven primarily by subdued import demand from leading importers, in tandem with abundant export availabilities in Europe amid limited internal sales.

World poultry meat prices continued to decrease in August as a result of abundant supplies, especially from Brazil, despite large purchases by several leading importers in East Asia and the Middle East.

In contrast, the FAO Sugar Price Index increased by 1.9 points from July at an average of 148.2 points in August, and as much as 37.7 points from its level in the corresponding period of 2022.

According to the FAO report, the increase in world sugar prices was mainly triggered by heightened concerns over the impact of the El Niño weather phenomenon on global production prospects.

It noted that in India, below-average rains in August were detrimental to sugarcane crop development, while persistent dry weather conditions in Thailand are expected to negatively affect the 2023/24 sugar production.

The report also showed that rains hampered field operations in some areas in Brazil, but the upward pressure on world sugar prices was curbed by large crop currently being harvested in the world’s largest sugar producing country.

“The weakening of the Brazilian Real against the U.S dollar and lower ethanol prices also contributed to curbing the rise in world sugar prices,” the report stated.